Student loans in the United States

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In the United States, student loans are a form of financial aid intended to help students access higher education. In 2018, 70 percent of higher education graduates had used loans to cover some or all of their expenses.^[1] With notable exceptions, student loans must be repaid, in contrast to other forms of financial aid such as scholarships, which are not repaid, and grants, which rarely have to be repaid. Student loans may be discharged through bankruptcy, but this is difficult.^[2] Research shows that access to student loans increases credit-constrained students' degree completion, later-life earnings, and student loan repayment while having no impact on overall debt.^[3]

Student loan debt has proliferated since 2006, totaling $1.73 trillion by July 2021. In 2019, students who borrowed to complete a bachelor's degree had about $30,000 of debt upon graduation.^{[4]: 1  [5]} Almost half of all loans are for graduate school, typically in much higher amounts.^{[4]: 1  [5]} Loan amounts vary widely based on race, social class, age, institution type, and degree sought. As of 2017, student debt constituted the largest non-mortgage liability for US households.^[6] Research indicates that increasing borrowing limits drives tuition increases.^[7]

Student loan defaults are disproportionately common in the for-profit college sector.^[8] Around 2010, about 10 percent of college students attended for-profit colleges, but almost 40 percent of all defaults on federal student loans were to for-profit attendees.^[9] The schools whose students have the highest amount of debt are University of Phoenix, Walden University, Nova Southeastern University, Capella University, and Strayer University.^[10] Except for Nova Southeastern, they are all for-profit. In 2018, the National Center for Education Statistics reported that the 12-year student loan default rate for for-profit colleges was 52 percent.^[11]

The default rate for borrowers who do not complete their degree is three times the rate for those who did.^[4]: 1 A Brookings Institution study from 2023 revealed that when the government pauses repayment on student loans, it most often "...benefit[s] affluent borrowers the most..." primarily due to affluent borrowers holding the largest student debt balances.^[12][13]